Philippines: Alcohol Tax Increase Ready for Adoption
Alcohol and tobacco tax increase in the Philippines are ready for adoption and awaiting President Duterte’s signature. Alcohol industry interference has significantly reduced the projected tax receipt from alcohol and tobacco taxation. But the new bicameral-approved final measure would bring in P22.2 billion in revenue.
As Movendi International previously reported President Duterte plans to partly fund a free healthcare program through alcohol taxes. The act on increasing and restructuring the excise tax rates on alcohol was passed as a priority legislative measure by the House of Representatives’ Committee on Ways and Means in August 2019.
Nevertheless, wine lobby groups railed against the proposed tax increase, aggressively lobbying to weaken the legislation meant to fund free healthcare. However, the bill withstood and the bicameral committee report on health promorion taxes was ratified by the Congress.
After some disagreements, provisions were amended the ratified bill proposes the following tax increases:
- Fermented alcohol (beer) – P35
- Distilled spirits – P42, plus an ad valorem tax of 22%
- Sparkling and still wine – P50
- Heated tobacco products (pack of 20s) – P25
- Salt Nicotine vapor product – P37
- Free base vapor product (vape) – P45
After 2020, the bicameral committee has approved taxes until 2023 as follows:
Alcohol (with a 6% indexation rate after 2023),
- Fermented liquor
- 2021 – P37
- 2022 – P39
- 2023 – P41
- Distilled spirits (with 22% ad valorem tax)
- 2021 – P47
- 2022 – P52
- 2023 – P59
Tobacco(with a 5% indexation rate after 2023),
- Heated tobacco products
- 2021 – P27.50
- 2022 – P30
- 2023 – P32.50
- Salted nicotine vapor products
- 2021 – P42
- 2022 – P47
- 2023 – P52
- Free base vapor products
- 2021 – P50
- 2022 – P55
- 2023 – P60
The measures were approved after President Duterte certified the bill as urgent which enabled it for final reading by the upper chamber the same day it was approved on second reading.
However, the original senate version proposed higher rates, backed by the Department of Finances. The intial rates would have brought in more revenue and a significant contribution to the Free Health Care programme. The Senate version would have brought in P47 billion revenue while the bicam-approved final measure would only bring in P22.2 billion in revenue.
I had pushed for substantially higher sin tax rates under our committee report to meet the funding requirements for universal health care,” said Senator Pia Cayetano, the Senate ways and means committee chair, as per Rappler.
Moreover, it is my firm belief that taxation can be an effective tool to deter the consumption of products that are deemed harmful to our people’s health. All this, while balancing the interests of the various industries involved,” added Senator Cayetano.
Under the approved measure, after splitting revenues, there would only be a net of P10.26 billion (60%) from the new tax revenue for Free Health Care.
Triple win measure
Alcohol taxation holds significant potential for population health, for helping achieve the sustainable development goals and also for significantly contributing to financing health and development.
As such Alcohol taxation is a triple win measure:
- It helps reduce and prevent alcohol-related harm.
- It helps promote health and sustainable development.
- It helps raise domestic resources for health and development.
Taxing of health harmful products such as alcohol is good for people, sustainable development and universal health coverage and should be a key policy measure within governments.